Intel may look externally for CEO: analysts

Chip giant may break with tradition in search for new leader

SAN FRANCISCO (MarketWatch) — Monday’s news that Intel Chief Executive Paul Otellini would be stepping down in May quickly sparked speculation on who might replace him as head of the world’s biggest semiconductor company.

Intel
INTC, +0.10%
historically has picked a new leader from within its ranks, in what typically have been orderly and predictable transitions. The company has had five CEOs in its 45-year history.

Intel CEO to retire in May

(4:33)

Paul Otellini will end a nearly 40-year career with the chip maker. (Photo: Reuters)

But given the magnitude of the challenges Intel faces, the chip maker may broaden the search externally for the first time, some analysts say.

Intel has gone through unexpected changes in the past few years. One involved Sean Maloney, one of Intel’s most highly regarded executives and a possible successor to Otellini. Maloney suffered a stroke in February 2010, forcing him to go on leave. He later returned to head Intel’s China business, but is set to retire in January.

“Bring back Pat Gelsinger?” Roger Kay of Endpoint Technologies Associates quipped. That was in reference to the former Intel executive who also was considered a potential successor, but left to be chief operating officer of EMC Corp.
EMC, -1.70%
and now is chief executive of VMWare Inc.
VMW, -0.72%

If Intel does go with an inside candidate, David Perlmutter is considered to be one of the front-runners. Perlmutter, known as Dadi, had served as head of Intel’s product-architecture group, and was promoted in January to chief product officer.

“If I had to pick one from internal, I’d probably go with Dadi,” Kay commented, mainly because Perlmutter is “strong in mobile” — the area where Intel is struggling to establish a stronger position.

But the analyst noted how Perlmutter “has certain top-down sort of style, like the military, which may be fine internally, but doesn’t go over so well with external audiences.”

Crawford Del Prete of IDC also mentioned Perlmutter and Tom Kilroy, general manager of Intel’s sales and marketing group.

“Both bring strengths,” he told MarketWatch. “Kilroy [has] the sales and marketing focus, which to some degree [are] a continuation of the Otellini focus. Perlmutter is more of a product and strategy focus. I think he could bring a focus to new products and markets for Intel, and get the company even more focused on growth in new areas such as future mobility platforms.”

Kay called Kilroy “Mr. Ultrabook,” a nod to the new ultrathin notebooks based on Intel technology, which the company hopes could revive a sluggish PC market. Nevertheless, Kilroy is “new on the scene” and “a relative unknown.”

Tom Kilroy

Patrick Wang of Evercore Partners said Brian Krzanich, who recently was promoted to chief operating officer, has been mentioned as a contender. But he said there also is speculation that Krzanich will go through “a multiyear incubation as a top C-level exec.”

Kay said Intel “may well dip down the ranks to fill the slot, so it could be a dark horse. … But my sense is they need stature.”

That has led to rumors that Intel may for the first time pick an outsider to run the company. “I think they will look externally,” JMP Securities analyst Doug Freedman told MarketWatch. “I don’t have a short list, but big company experience [is] likely needed.”

JoAnne Feeney of Longbow Research argues that expanding in mobile is not the only concern. In a note, she wrote that it’s “likely that the board sees that Intel needs a sharp change in direction — not just a change toward mobility markets, but also to include foundry operations or some other move to capitalize on Intel’s manufacturing leadership.”

“Previous CEO transitions have all involved carefully groomed internal candidates, but if Intel’s board is now looking externally — to bring in new skills — that would explain the lack of named successor and length of time in transition,” according to Feeney.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information. Intraday data
delayed per exchange requirements. S&P/Dow Jones Indices (SM) from Dow Jones & Company, Inc.
All quotes are in local exchange time. Real time last sale data provided by NASDAQ. More
information on NASDAQ traded symbols and their current financial status. Intraday
data delayed 15 minutes for Nasdaq, and 20 minutes for other exchanges. S&P/Dow Jones Indices (SM)
from Dow Jones & Company, Inc. SEHK intraday data is provided by SIX Financial Information and is
at least 60-minutes delayed. All quotes are in local exchange time.